Answered

A firm is likely to be a natural monopoly:

A. when the demand for its product or service is inelastic.
B. if it is producing an inferior good.
C. if economies of scale are experienced over the full range of output.
D. because the government grants it an exclusive franchise.



Answer :

GinnyAnswer

Final answer:

A natural monopoly arises when a firm can serve the market demand at a lower cost due to economies of scale, enabling it to achieve monopoly control.


Explanation:

Natural monopoly occurs when a firm can serve the entire market demand at a lower cost than smaller firms due to economies of scale. For example, utilities like electricity distribution showcase this. Because of these cost advantages, a single firm can gain monopoly control in the market.


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